If the acquisition is made, it will occur on January 1, 2015. All cash flows shown in the income statements are assumed to occur at the end of the year. GCC currently has a capital structure of 40% debt, but Trans World would increase that to 50% if the acquisition were made. GCC, if independent, would pay taxes at 20%; but its income would be taxed at 40% if it were consolidated. GCC's current market-determined beta is 1.6, and its investment bankers think that its beta will rise to 1.7 if the debt ratio were increased to 50%. The cost of goods sold is expected to be 65% of sales, but could vary somewhat. Depreciation-generated funds would be used to replace worn-out equipment, so they would not be available to TransWorld's shareholders. The risk-free rate is 6%, and the market risk premium is 3%. Do not round intermediate calculations.

1. What is the appropriate discount rate for valuing the acquisition?____ % (to 2 decimals)
2. What is the continuing value? $____ thousand (to 1 decimal)
3. WhatisthevalueofGCCtoTransWorld?$_____thousand(to1decimal